“Too Important to Jail,” the Yates Memorandum and FCPA Criminal Prosecutions

The Justice Department’s continuing lack of individual criminal prosecutions in the FCPA arena continues to raise serious questions. DOJ’s issuance of the Yates memorandum was seen as a new and important reiteration of DOJ’s commitment to individual prosecutions.

In several significant areas, healthcare and antitrust, individual prosecutions have continued at a significant rate. One could argue that such prosecutions were already occurring in these areas and there was no significant change after the Yates memorandum.

One example, which does not prove the efficacy of the Yates memorandum, was in the car safety prosecutions of General Motors, Volkswagen, and Takada. The GM prosecution included no individuals and occurred shortly after the Yates memo was released. In contrast, the VW and Takada prosecutions, which occurred this year, included a total of nine indicted individuals.

When it comes to the FCPA, there is no justification or explanation for DOJ’s failure to indict individuals. If you read through the facts of the significant enforcement actions, there are culpable individuals who stick out like sore thumbs, who easily could have been prosecuted. Yet, we see no changes against any individuals in these cases. The silence speaks for itself.

One explanation often heard is that FCPA criminal cases are “complex” and “difficult” to bring against individuals. That is not a very persuasive claim. DOJ has been bringing complex criminal cases for years, and there is nothing so unique about the FCPA that would prevent prosecutors from bringing criminal cases.

The Antitrust Division has a strong record, with wins and losses, in bringing criminal cases against executives for collusion in international markets. In fact, the Antitrust Division often argues that it has the unique ability to bring such cases given the complexity of antitrust cartel cases and the difficulty in securing international evidence and cooperation. Indeed, the Antitrust Division indicts three individuals for every corporation prosecuted for illegal cartel activity. The Antitrust Division does not shy away from difficult cases, and has won some significant cases, and lost some high-profile cases as well.

My fear is that the Justice Department has become gun-shy because of some early missteps and losses in the FCPA arena. DOJ suffered some embarrassing losses in the Shot Show sting case, as well as the recent Petro Tiger case. Those cases, however, should not be a justification for sounding a retreat.

To the contrary, DOJ needs to move beyond these past prosecutions and reinvigorate its enforcement program to address this glaring omission. Any prosecutor will candidly admit that losing a case “stings,” but in the end the mark of a strong prosecutor is the ability to accept such defeats while continuing to prosecute cases with a positive attitude. Of course, prosecutors “learn” from such losses, and there are an infinite variety of variables or events that can occur mid-trial that can turn a strong case into a weak one – every prosecutor can tell you about those cases.

The Justice Department continues to suffer perception problems from its failure to prosecute high-level executives involved in the 2008 financial crisis. It was from those controversial events that we started to hear – “Too big to jail,” and “Too big to fail.” DOJ needs to regain its credibility and integrity by resuming its historical record of prosecuting those individual who should be prosecuted, whether they are in the C-Suite, mid-level or lower-levels of the corporate ladder.

The Justice Department’s credibility is at issue, especially after touting the Yates memorandum and the impact it would have on DOJ’s prosecution of culpable individuals. In the FCPA arena, it is almost laughable that we have seen no significant individual prosecutions for foreign bribery after the issuance of the Yates memorandum. DOJ needs to return to its mission and ensure that it abides by its mantra – “equal justice under the law.”